Q3 2020 Laureate Education Inc Earnings Call

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Ladies and gentlemen, thank you for standing by and welcome to the third quarter 2020 Laureate Education Inc. earnings Conference call.

At this time all participants lines are in a listen only mode.

His presentation to be a question and answer session to ask a question during that session. We need to press star one of your telephone.

Please be advised that todays conference is being recorded an accrual for any further Citi. Please press star Zero I.

I would now like to hand, the conference over to your speaker today at a more stringent. Please go ahead Sir.

Good morning, everyone and thank you for joining us on todays call discuss learning education third quarter 2020 results.

That we discuss including adjusted EBITDA and free cash flow.

Are also detailed and reconciled to their gap counterparts in our press release or supplementary presentation.

Before turn the call over to Eyelift I would like to note that following the closing of certain additional asset divestitures.

As part of our previously announced strategic review and assigning of others.

We're required to move those operations to discontinued operations.

Therefore Ah results being reported today for continuing operation include only are remaining Mexico, Peru and corporate statements.

In the appendix to the slide presentation. We have included a table with historical data for a revised presentation of continuing operations.

We hope that you will find that information helpful. As you update your models.

With that let me turn the call over to eyeless.

Thank you have it on good morning, everyone I'm Pizza reports third quarter results, which were in line with expectations.

Well. This is modem continues to exhibit recipients it through the COVID-19 pandemic.

Liquidity precision remained strong.

The management team is focused on tight close controls and the acceleration of certain productivity initiatives.

These actions have kept us on track for the year, and we are reaffirming or guidance expectations for 2024, the business units that remained within continue continuing operations.

I will just tell you the faculty and staff of once again for their agility and commitment to deliver on our promise to our students.

These past eight months have been challenging for everyone.

And I greatly appreciate all the team members efforts.

No. That's top priority continues to be the health and wellbeing of our students faculty and staff, while delivering high quality educational offerings, and a safe and responsible manner.

During the quarter, we made significant progress on a strategic review, having signed definite agreement to sell a operations in Brazil.

As well as would the University, which is our online institution here in the United States.

In addition, we are closed on the sale of our operations in Chile in Malaysia during the third quarter.

Even the significant size of the operations new city and discontinued operations.

We have included in the appendix a summary of key operating metrics.

For those operations.

As of September 30th we had approximately $2.6 billion of additional net proceeds.

Proceeds expected from pending divestiture transactions.

Oh that we collected nearly 650 million from the completion of the sale of Australia and you see the operations earlier this week.

Even though a stroke liquidity position combined with expectations for continued positive free cashflow generation from our operations and the large cash proceeds from pending divestitures.

Earlier. This morning, we noticed that our board of directors.

Approved a 300 million dollar.

Stock buyback program.

Filtering or efforts to increase shareholder value.

Oh remaining portfolio no consists of two scaled markets with share characteristics.

And both Mexico, and Peru, we Oprah leading brands that have similar market segmentation strategies.

Oprah waiting both premium and that is your bread institutions in those markets.

Both markets are large with significant long term growth opportunities given the relatively low higher education participation rates.

And both market have favorable regulatory condition that are supportive of quality private education providers.

The remaining business is it scared with approximately 1 billion in revenues and adjusted EBITDA margin of 29% prior to corporate overhead.

And those provides multiple options for l'oreal to maximize shareholder value.

Indeed, and that our operations in Mexico, and Peru, where to remain in the stands on public company, we anticipate being able to operate these markets with a 70% to 80% reduced G&A footprint, which should you very attractive margin and.

<unk> conversion profile for our investors.

However, we will continue to store strategic transactions for remaining operations in both Mexico improve and would pursue opportunities that can generate superior value for our stakeholders natural friction kohl's.

Versus retailing those operations as a publicly traded company.

Oh, no turn the call over to J J for more detailed financial overview of the third quarter and the year to date performance J J.

Thank you I that.

Before we go through our results for the quarter I would like to highlight that even though our financial has been reset for discontinued operations.

This is now here of the business remains largely untold.

The first and third quarter represents the maintenance a cycle and the second and fourth quarters.

So for the P&L suspected as classes are in session during those periods.

Additionally.

I have discussed during last quarter's earnings call the faithful of our continent revenue as in further impacted by the COVID-19 pandemic.

This resulted in moving a number classes from early in the year to the third quarter.

In light of that we believe that our year to date results may be more representative of our current operating performance.

Per year. These results were broadly United with our expectation given to continued impact of the COVID-19 pandemic.

Total enrollment show a similar trends with the decline of 7% versus prior year.

Revenue trends for the declining enrollments, we here to get revenue down 7% as compared to the same here a year ago.

Adjusted EBITDA to your today September is down 14%, mostly due to revenue deferrals into Q4.

Improve the may intake cycle occur earlier this year. However in that market, we do have a smaller secondary intake which occurred during the third quarter.

The result, improve also continue to be impacted by the COVID-19 pandemic and as a result of secondary intake for Q3 was down 22% versus prior year.

The impact on total enrollments was more limited to being down only 13% as compared to the same period last year aided by the better performance of our primary taken March.

If we look at our performance by execution will be continued to see what we experienced in the second quarter.

The enrollment.

Remains unchanged and is as follows.

For continuing operations pull enrolled estimated to be approximately 325000 students.

Revenues estimated to be between 1 billion and $1 billion and $20 million adjusted EBITDA estimate to be 185, and $195 million. This is comprised of approximately a $100 million of full Virginia expenses and between 285 and 200.

We received this week from the close of the scale of our businesses in Australia and New Zealand.

Let me know clothes out my carry remarks by providing some guidance on the use of our excess liquidity.

R capital allocation strategy remains unchanged.

First support our business operations second repay our deck only if needed finally returned excess capital to shareholders, the low specs efficient manner possible.

On slide Nike, we have laid out a comment or how we're thinking about doing that.

Today, we are taking the first step by announcing an organization for you share repurchase program up to $300 million.

That concludes my remarks now back to you further wrap up.

Thank you J J.

We are very pleased with the Resurgency that our business model continues to demonstrate despite the impact of depend homage.

We will continue to be proactive and managing the business and the <unk> during the pin damage.

One of the same time pursuing strategic transactions for a room made me markets to generate incremental value opportunities for our shareholders.

Operator, that's in two so prepared remarks, and we had no happy to take any questions from the participants.

Thank you as a reminder to ask a question you would need to push star one on your telephone.

To enjoy your question press the pound key.

Please Sam <unk> roster.

And our first question will come from the line Shlomo Rosenbalm from Stifel. You may begin alright.

Hi, How're you doing this out a month for Shlomo could you talk a little bit more about the kind of a plan to return capital of shareholders and the most you know kind of tax efficient way possible. I went all the assets are sold and I say today that you announced that $300 million buyback program, but ultimately there's gonna be a pilot cash left over after all these cells <unk> shareholders realize this.

You have the cash and kinda most techs efficient manner.

Okay, Yeah, I'll take that one thank you I left hi, Shlomo on the.

The the.

The most tax efficient manner, two returns capital to shareholders in the form of open market purchases so share buyback.

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